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The economics of sustainability in the context of climate change: An overview

  • Guest, Ross
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    The emerging field of sustainable business has its roots in both science and economics--in particular the fields of environmental science and the economics of sustainability. This article provides an overview to the latter field with application to environmental damage due to climate change. The aim is to provide an economic context for the papers in this special issue. The article outlines four essential elements in what has become a vast literature in the economics of sustainability in the context of climate change. First is the dilemma in valuing the distant future which concerns the vexed issue of discounting outcomes that are expected to occur over a very long time horizon. The second is the related characteristics of uncertainty and irreversibility that create an option value in taking action. The third element is the peculiarities of natural capital (arising from the natural environment) compared with reproducible capital (things we make that are used to produce goods and services). The post-neoclassical notions of social capital and knowledge capital are also briefly mentioned. The fourth element is how to manage the global "commons", the prime example of which is the climate. This article is written for the general business reader with an understanding of basic economic concepts and therefore avoids mathematics. References to more technical treatments are provided.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1090951609000418
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    Article provided by Elsevier in its journal Journal of World Business.

    Volume (Year): 45 (2010)
    Issue (Month): 4 (October)
    Pages: 326-335

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    Handle: RePEc:eee:worbus:v:45:y:2010:i:4:p:326-335
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    1. Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1257-1268, December.
    2. Solow, Robert, 1993. "An almost practical step toward sustainability," Resources Policy, Elsevier, vol. 19(3), pages 162-172, September.
    3. Stavins, Robert N. & Wagner, Alexander F. & Wagner, Gernot, 2003. "Interpreting sustainability in economic terms: dynamic efficiency plus intergenerational equity," Economics Letters, Elsevier, vol. 79(3), pages 339-343, June.
    4. Heal, G., 1998. "Valuing the Future: Economic Theory and Sustainability," Papers 98-10, Columbia - Graduate School of Business.
    5. Graciela Chichilnisky & Geoffrey Heal, 1993. "Who Should Abate Carbon Emissions? An International Viewpoint," NBER Working Papers 4425, National Bureau of Economic Research, Inc.
    6. Richard T. Woodward & Richard C. Bishop, 1997. "How to Decide When Experts Disagree: Uncertainty-Based Choice Rules in Environmental Policy," Land Economics, University of Wisconsin Press, vol. 73(4), pages 492-507.
    7. Graciela Chichilnisky, 1997. "What Is Sustainable Development?," Land Economics, University of Wisconsin Press, vol. 73(4), pages 467-491.
    8. Padilla, Emilio, 2002. "Intergenerational equity and sustainability," Ecological Economics, Elsevier, vol. 41(1), pages 69-83, April.
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